Co-living lease structure question

[Joseph Harr]

I was listening to a real estate investing podcast (not BiggerPockets) and they had on a guest who invests in co-living properties. He said they get around occupancy limitations by creating a co-living management company and then having the people who live in the house sign a membership agreement with that entity to pay "dues" to live in the house. Also, he said that makes evictions super easy because they didn't sign an actual lease. All of that sounds like BS. It would be nice if it was legit because my city has a 3 unrelated adult limit. Also, apparently the guy sells $10k and $30K co-living courses which I'd never buy. Has anyone tested this model?

[James Jones]

You’re right to be skeptical, that “membership company” workaround gets thrown around a lot, and most of the time it’s either misunderstood or pitched by gurus trying to sell a course.

Here’s the reality after running co-living properties at scale:

1. A membership agreement does NOT magically override local occupancy laws.
Cities don’t care what you call the arrangement, lease, membership, license, “dues,” etc. If your zoning or building code limits unrelated adults, that limit still applies. Violating it can get you fined or shut down.

2. Evictions aren’t automatically easier.
Some operators use a license agreement instead of a lease, which can shorten the removal process in certain states, but it’s absolutely not universal. Judges still look at the substance of the arrangement, not the label.

3. The ‘management company’ trick only works in very narrow jurisdictions.
In some areas, operating as a boarding house / rooming house with a proper license creates different rules around occupancy and removal, but you need zoning approval, inspections, fire upgrades, etc. Most cities treat this as a commercial use.

4. Anyone selling $10K–$30K courses on this model is skipping the hard part: local law.
Co-living can work great, but only with:

• proper screening

• strict house rules

• weekly cleaning

• clear expectations

• compliance with your city’s occupancy limits

There is no legal shortcut that magically bypasses zoning + occupancy limits.

If your city caps at 3 unrelated adults, the only legit ways to go above that are:

• Zoning for rooming / boarding house

• Conditional use permits

• Assisted care licensing (totally different world)

• Converting to multi-unit legally

Everything else is “guru fantasy land.”